Correlation Between ServiceNow and Marine Products

Can any of the company-specific risk be diversified away by investing in both ServiceNow and Marine Products at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ServiceNow and Marine Products into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ServiceNow and Marine Products, you can compare the effects of market volatilities on ServiceNow and Marine Products and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ServiceNow with a short position of Marine Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of ServiceNow and Marine Products.

Diversification Opportunities for ServiceNow and Marine Products

0.59

Correlation Coefficient

ServiceNow  Marine Products

Very weak diversification

The 3 months correlation between ServiceNow and Marine is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and Marine Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marine Products and ServiceNow is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ServiceNow are associated (or correlated) with Marine Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marine Products has no effect on the direction of ServiceNow i.e., ServiceNow and Marine Products go up and down completely randomly.

Pair Corralation between ServiceNow and Marine Products

Considering the 90-day investment horizon ServiceNow is expected to generate 1.16 times more return on investment than Marine Products. However, ServiceNow is 1.16 times more volatile than Marine Products. It trades about 0.22 of its potential returns per unit of risk. Marine Products is currently generating about 0.01 per unit of risk. If you would invest  89,039  in ServiceNow on September 18, 2024 and sell it today you would earn a total of  23,954  from holding ServiceNow or generate 26.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

ServiceNow  vs.  Marine Products

ServiceNow

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, ServiceNow showed solid returns over the last few months and may actually be approaching a breakup point.

Marine Products

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marine Products are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Marine Products is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ServiceNow and Marine Products

The main advantage of trading using opposite ServiceNow and Marine Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ServiceNow position performs unexpectedly, Marine Products can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Marine Products will offset losses from the drop in Marine Products' long position.

The idea behind ServiceNow and Marine Products pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.